Today’s global travel sector, which many characterize as being “on the brink of collapse,” is simply unprecedented. Seven months into a 100-year worldwide pandemic which caused a swift, wide, and deep economic recession has decimated key travel and leisure related industries including airlines, car rentals, cruise lines, ridesharing, and tour operators. While stock markets have rebounded to near record levels, the US lodging industry continues to experience crippling stress as travel demand, which has experienced a sharp and sustained decline, continues to significantly lag pre-pandemic levels. Although most segments of lodging demand came to an abrupt halt during the COVID-19 crisis, hotels located in urban markets, particularly group and meeting/convention-oriented properties, have been most negatively impacted and will likely take the longest period to recover.
The LW Hospitality Advisors (LWHA) Q3 2020 Major U.S. Hotel Sales Survey includes 12 single asset sale transactions over $10 million, none of which are part of a portfolio. These transactions totaled $829 million and included approximately 2,700 hotel rooms with an average sale price per room of $306,000. By comparison, the LWHA Q3 2019 Major U.S. Hotel Sales Survey identified 40 transactions totaling roughly $3.725 billion including 13,100 hotel rooms with an average sale price per room of nearly $283,000. Comparing Q3 2020 with Q3 2019, the number of trades decreased by approximately 70 percent while total dollar volume declined roughly 78 percent and sales price per room increased by roughly 8 percent.
Noteworthy observations include:
- Three trades occurred in California and two sales transpired in the States of Arizona, Massachusetts, and New York.
- Five trades were consummated for $100 million or more each.
- Two trades transpired for greater than $700,000 per unit.
The Q3 2020 Major U.S. Hotel Sales include:
- Acorn Development LLC, an Amazon subsidiary, acquired from Blackstone the 299 key Residence Inn by Marriott Arlington Pentagon City in Arlington, VA for $148.5 million or nearly $500,000 per unit. Amazon plans to demolish the 24-year-old high rise hotel and incorporate the 1.5-acre site into their HQ2 PenPlace Development. In mid-2019, the seller, Blackstone, purchased the property for $99.1 million from Host Hotels & Resorts, Inc. (HST). The latest transaction represents an approximate 50% profit within one year for Blackstone. The current trade is remarkable in that Amazon’s HQ2 plans were widely known when HST sold the asset to Blackstone last year.
- Magna Hospitality Group purchased the 310 key Embassy Suites by Hilton New York Manhattan Times Square in New York, NY for a reported purchase price of $115.1 million or roughly $371,000 per unit. The seller, Ashford Hospitality Trust Inc. (AHT), acquired the property in early 2019 for $195 million, representing a 41% decline in value during their 18-month hold.
- Xenia Hotels & Resorts, Inc. (XHR) announced the sale of the 221-room Residence Inn Boston Cambridge in Cambridge, Massachusetts for $107.5 million, or approximately $486,000 per key. The sale price represents a 11.6x multiple and a 7.8% capitalization rate on the hotel’s 2019 Hotel EBITDA and net operating income, respectively.
- A planned